JPY Trading Outlook (09-05-2014)

USD/JPY EUR/JPY led the way down for yen pairings today after the ECB announced no policy changes, then Draghi laid the foundations for June easing during his presser. EUR/JPY is well below its up TL from Apr ’13 lows, Friday at 141.38. The daily Cloud, which had more or less propped up the cross since it twisted mid-April, was deeply delved, though the base at 140.02, the 50% of the Feb-Mar rise there and Mar 23 & Apr 8 lows either side of the figure remain unscathed so far. There’s still room for the ECB to disappoint with its easing execution next month, but the broader issue is the waning confidence in the Abenomics trades from last year (short yen and long Nikkei) as USD/JPY y/y % changes approach zero and drastically reduce Japanese exporter profits and imported inflation and reflation. USD/JPY’s series of higher lows since Feb is intact, but the 101.32 low from last month is uncomfortably close, even if importers remain bid in the low 101.00s. The 200-DMA is at 101.07, so a sub 101 close would force more specs to sell. The ECB’s expected ease may put pressure on the BOJ to rethink not launching QQE2 before the GPIF midyear reallocation.